Recently, news of Lenovo’s big expansionary efforts has been constant, with purchases of IBM’s low end server business and Google’s Motorola cell phone business costing over 5 billion USD. Of course, these two acquisitions require US government review, however it is expected that the company will pass with little trouble.
Lenovo’s impressive purchases in the US and Huawei’s bitter experience in the US market form a stark contrast. Huawei has also tried to make purchases in the US, all of which it ultimately had no choice but to abandon due to US government obstruction, so much so that one acquisition worth only a few million US dollars also sunk like a stone because of US government rejection. Forgetting acquisitions, later, telecommunications and Internet products simply produced by Huawei were also prohibited by the US from entering the American market for reasons concerning national security.
Back when Lenovo was aquiring IBM’s computers, in fact it too encountered the great uproar over the so called threat to US national security, such that even after successful acquisition there were still people who were strongly opposed to American government departments purchasing Lenovo PC computers, believing they were a security threat. As Lenovo has walked its path over the years, this kind of racket seems to have lessened a lot, to the point that today, Lenovo is able to purchase relatively smoothly from IBM and Google.
No matter if one looks at Lenovo and Huawei from a scale perspective or form their degree of internationalisation, there is no doubt they are standouts in China’s information industry today. The two companies have also both suffered accusations of threatening American national security while in the American market, however their circumstances in America today are already vastly different. One has unlimited prospects, and one has had the door shut in its face and has even encountered attacks that have chased them outside the American market. I am afraid that everyone will have the question，why is Lenovo OK, while Huawei is not?
Perhaps some will say that Lenovo’s communication abilities are strong while Huawei’s are weak, and so that is why Lenovois able to enter the American market. This point, I am afraid, is not precisely correct. Although Huawei is relatively low-key and unwilling to be in the media limelight, this certainly doesn’t mean that Huawei is stiff and inflexible. Huawei in its early years was called a ‘wild wolf’，both fierece and agile. In terms of its communication with America, the time and energy spend by Huawei has been more than that of Lenovo’s, for example in spending money to hire America lobby companies to conduct lobbying.
Also, with respect to the notion that Huawei is ‘not open’, the Vice Chairman of Huawei, Hu Houkun, once wrote an open letter calling on the American government to open a formal investigation into Huawei. Huawei has also repeatedly requested for so-called “evidence” to be brought into light, and also has openly and transparently cooperated with intelligence committees. Yet, in the end Congress’ reports only speak of threat – far from providing clear information or evidence to confirm its legality.
Huawei and Lenovo’s radically different experiences in America very obviously are not market issues. Those who defend America by trying to find reasons from the market side, undoubtedly are wasting their energy or are just using sophistry. Then what on earth is the reason? In the recent past, Turkey wanted to purchase an anti-aircraft defence system and, through a tender, chose China’s system, causing America and NATO to be extremely unhappy and exert pressure on Turkey to give up its China purchase. What does this ‘Chinese catastrophe’ mean? It means that America and NATO felt threatened and under the influence of precisely this fear did America attempt in all ways to pressure Turkey to give up purchases of Chinese guided missiles and anti-aircraft systems. Why this global American containment for the Huawei approach, and authorisation for Lenovo to enter the American market? The real reason lies in that America has felt the threat of Huawei, but does believe at all that Lenovo has any threat to itself.
In global opinion today, there are very different judgements about China: some believe that China will overtake the United States and become the world’s leader, others believe that China is just another Japan, and will only shine for a moment. When the US dealt with Japan at the time, it also applied a form of containment policy, for instance by forcing Japan to sign the Plaza agreements, and forcing Japan to open its market. But there’s two main reasons why the US economy ultimately triumphed over Japan: one is that the US capitalists have found a new area of economic growth, and completed a full round of industrial upgrading, and the US led the great development of the information industry, including computers, communications and networks – the Silicon valley, that we’re familiar with today, is one of the symbols of this. We know that capitalism will only maintain its vitality by continually identifying and developing new forms of demand from consumers, and only repeated industrial revolutions over the year, constantly creating new demands in the market, have resulted in the situation of capitalism today. The development of the American information industry is no doubt a form of self-regeneration for capitalism. During this time of renewal, Japan lagged behind the United States, and this is the main reason why Japan lost in the competition with the United States. Another reason for Japan to fail in the competition is that, when faced with new market agreements, it responded wrongly, developed a bubble, and in the end was only harmed by itself. I read a piece saying that at the height of the Japanese bubble in the eighties, the land value of the few idle acres of land in the Japanese imperial palace were worth more than the entire land in Canada, and the value of land in Tokyo alone exceeded the value of land in the entire United States. I do not know how authentic this information is, but it goes to show how insane the Japanese bubble was at the time, and the bigger a bubble is, the greater the loss when it breaks. The failure of Japan in its competition with the US was the result of the development of the information industry in the US, and Japan’s own self-destruction. But what does any of this have to do with what Lenovo and Huawei experienced in the US?
We know that Japan’s manufacturing sector is still very strong, quality is still very high, but in new industries, it lags behind the US, and the US is not threatened. The model followed by Lenovo today is still the Japanese model, it follows the ‘fine-work’ model of production. Its industrial design may be very good, its production may be even better, and it may even serve as a model for the automobile industry around the world, but the product is an old product, and although there is some innovation, there is not much, and so it doesn’t threaten the heart of American industry. Whether it’s the double acquisition from IBM or the one from Google, we’re only talking about peripheral, burdensome areas of both companies. The core of IBM is software and services: hardware used to be its flagship, but today is just waiting to be eliminated. The core of Google is web search and software. Acquiring Motorola might have been a mistake, and selling it off today may be seen as refocusing on the core. Acquiring the low-end business of these American companies, I’m afraid this won’t be experienced as a threat. It should be said that most of China’s manufacturing today is the same as Lenovo, it pursues a Japanese-style ‘fine work’ product strategy. Therefore, we can understand how Lenovo was received in the US.
The difference between Huawei and Lenovo has to do with how they threaten the core America’s information industry. Huawei’s rapid development and their investment in R&D and technology has been seen as a threat by the American Cisco. Cisco is not an ordinary company, it is a core company of the US information sector. People used to put together the names of Microsoft, Intel and Cisco to form the word ‘Wintelco’, which shows the importance of these three companies for the IT industry. It should be said that China has not yet produced a software company that could rival microsoft, and neither IBN not Intel consider Lenovo as a threat. But Cisco admits that Huawei is a rival. This year, as the US government had not yet come forward against Huawei, showing that it did not perceive it as a menace then, Cisco foresaw Huawei’s potential in network equipment, and proactively launched a lawsuit against Huawei to expel them form the US market in advance. But this did not prevent Huawei from moving forward. After years of development, Huawei has become a worldwide IT infrastructure giant, and like other multinationals, Huawei products are continuing to expend their presence, which made the US feel threatened. The reason why the US is trying to kill off Huawei is just this, and ‘security’ is nothing but a good-sounding pretext.
For the US, the memory of the Japanese threat goes deep. At the time, before the US finished upgrading its IT industry, the defeat against Japan’s Seiko is still very painful. The purchase of American entertainment and real estate companies by the prosperous Japan still causes sorrow. The Chinese American citizen Chen Guoren was beaten to death by workers of the American automobile industry because he was mistaken for a Japanese, and only after a restructure forced by Japan did Intel corporation rise to its later glory. After this painful lessons, many Americans believe that only paranoia will support survival, and so you have to be vigilant, destroy the threat, nip it in the bud. Cisco suing Huawei was nothing yet, now the American government is on the case. Arbitrary accusations are enough for condemnation, like Ren Zhengfei having a history with the People’s Liberation Army, it’s all coming out.
Whether China will overtake the US economically, according to current trends, is not a question of if, but when. But whether China will follow the same path as Japan today depends on two aspects of the relationship with the US. It should be said that media shout outs about Japaan at the time was even more resounding than it is for China today, so we cannot be certain that we will overtake the US. But this depends on whether the US can repeat what they did back then, and find a large new market to satisfy as they did with information technology. The US may want to develop their financial industry, and using virtual economy or similar high level concepts, get hold of the wealth of the world. Many economists, like Chen Zhiwu, hold them in high esteem in that regard. But the 2008 financial criss has given a blow to the United States, and many forms of ‘financial innovation’ supported by public propaganda turned into the sparks of the crisis. In other areas of emerging demand, the development US faces many problems. For instance, if we look at biotechnology, if they can solve cancer, diabetes, or other illnesses, there can be huge developments, but at the moment, we cannot see much hope. As for environmental protection and low-carbon technology, developing countries do not want to pay for them, they hope to adopt free or low-cost technology. But the US and other Western countries on the one hand stress the urgency of the question, while hoping to make considerable money from that industry, which cannot be justified in moral terms. And so, it will be difficult for the US to continue leading ahead of the Chinese economy, because it is unclear whether they will be able to undertake a complete industrial upgrading.
China wants to overtake the US in economic scale, and gradually overtake the US on all other aspects. First, it can’t want to face huge problems of its own, like Japan, and when it faces containment from the US, it wants to be able to respond properly. Second, China is not japan: during its ‘lost two decades’, Japan maintained social stability, and the patience, optimism and competitiveness of the people has been maintained. This is a point that Ren Zhengwei from Huawei notes and admires in his book ‘Northland’. But there is also a chance that under the condition of fast economic growth, China will experience similar situations as Ukraine and Egypt, especially after their transition to Western style democracy, with high possibilities of civil unrest. If this happened, China would be even more miserable than today’s Japan. Therefore, in order to overtake the US, it is essential that China maintains a stable social situation internally.
Today, the US is containing Huawei everywhere, like the reason why Cisco is suing Huawei, is because of their superior ‘certificate’ systems – and I hope that in the future, we will see more cases like Huawei, of companies that the US try to contain.
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Source : my1510